Speaker 1Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests, and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone, it is Tuesday, 13th of October, 2026. And yeah, market's in an interesting state here. We had another one of these big divergence days with a lot of tech names, a lot of AI hardware names doing poorly. The SOX index was down 2.67%, some very heavy selling once again overnight in Asia. Look at the COSP, it was down over 5%, down more than 6% at one point intraday. And not a good look for that space. I'm not sure if there's any sort of specific spark to it. But then you look at the broader index, and it was flat on the day, so the S&P was almost flat, minus five hundredths of a percent, while the equal weight S&P 500 was up around five hundredths of a percent. But you know, Russell was down almost half a percent, and NASDAQ 100 with this more tech heavy feel was down minus 0.7. And what is feeding this? Obviously the oil price, a big concern. It was up very heavily yesterday. We've rolled back another dollar or so, dollar and a half or so from the highs, I think around 107. For the high was the high, 107 spot something for the December Brent future, now trading the low 105s this morning as I'm recording this podcast. And then you look at the dated Brent price, so that's like if you want to go out and secure a cargo right here and now, $134 for dated Brent. That's unbelievable backwardation there. And just to contrast this with other crude grades around the world, Shanghai paying $111 for whatever their front future is. I'm not sure if that's November or December. And the WTI contract at 92 and a half. So just the significant spread there. The U.S. onshore prices, at least for crude, significantly lower, even though we're talking about these still near record diesel prices, which have been the focus. Of course, Trump getting in hot water with parts of his own party, if you want to call it a party, with this deal for a Russian diesel. They have all kinds of interesting and concerning, depending on your point of view. But I think the signs of a rift there is Russia's mounting massive attacks on Ukrainian energy infrastructure when Trump has been trying to run around talking about an energy deal that just isn't there. And then in Europe, you have the added angle of the price of natural gas, which is very, very high, 84 and a half euros for that one month future, the TTF future, so-called. And we're only built to around 74% of full storage for natural gas stores. That's below. At least a few percentage points below where we were in late 2021 when Russia was turning down the access to gas for Europe with thin excuses, obviously preparing to hope that Europe would be running out of gas when he was planning that attack on Ukraine the next year in February. So just for equivalent, that's like, what is it, euros per megawatt hour, if you convert that to what the U.S. natural. Gas future trades at, which is currently around 320 last I checked, that's like a price of 27.7. So we're talking on the order of nine times ish of what the U.S. is paying for natural gas. It's just prohibitively expensive, far above what has been sort of the range that has settled post the Ukraine war start. We had even more insane prices, a double and more of that 85 euros ish per megawatt hour back. In the initial phase of the war. But if you look at the range in 2023 through early this year, it was never really above 60 and it was generally well below that level. So this is, again, prohibitively expensive, just a really putting the, you know, putting a squeeze on the economy here with these types of prices. And then aggravating still in the background, we have these more attacks in Riyadh. There's talk of whether the U.S. is going to have to step in to help Saudi with these Houthi attacks. And just, you also just get this sense of, you know, what is the solidity, if any, of the Saudi regime? I have no idea what would replace it if it wasn't there, but I just, it just looks concerning this whole backdrop, the whole stability of the Middle East to my mind in question here. Yeah. And then we're down. I should, I should have admitted, should have actually added that we are down because of that really ugly performance in Asia overnight. The U.S. future is not liking the, I should say the NASDAQ future is not liking that big dump. And the KOSPI is down quite heavily, well over 200 points, even with the S&P almost flat or barely down the futures that is on the overnight session. So yeah, and we have treasuries coming in quite a bit here. So you're starting to wonder if U.S. treasuries are serving their old fashioned safe haven function here. I got the 10 year indicated down sub 5.2%, lowest in over a week, down five basis points, the yield. And yeah, again, is this a safe haven sign here? Yeah. That's helping out dollar yen, by the way, on the macro front, as we saw dollar yen squeezing up above uncomfortably above that 200 day moving average and some local highs there, 158.75 a hit. Now it's down in the low 158s as I'm talking here. And I think this, that combination, I've said this in the past, that combination of risk off and lower yields, you know, crude oil price be damned. I think as long as the yields are not responding to the crude oil price, I think that helps out the yen's case here. It certainly needs a bone thrown at it. It's at a very ugly technical tipping point, as I wrote in my FX update. I'll put a link to that in the podcast episode description, by the way. Back in the low 158s, it's a key tipping point. And we need to, for various technical frameworks, that pair needs to sell off. And really, yen pairs more broadly need to sell off to maintain sort of a sense that the yen is going to continue to rally here. Euro dollar did hit a new low, but similar to dollar yen, that has reversed a little bit. So 111.50s traded yesterday, and we're back getting closer to 112, actually, here this morning in Europe. And then you see, it was at the FT, I saw a headline passed along by Michael Every on reverse Brexit. I think this is getting some traction. And you wonder if Eurostarling has significant further room to move to the downside if this narrative solidifies that there is some kind of deal in the works, maybe to, with or without Brexit, to at least get a customs deal and these barriers to trade pulled down between the UK and the rest of the Eurozone. Germany, France, by the way, did close yesterday marginally at a new high for the cycle. If you just look at daily closes, the intraday high of 159, we've got nowhere near that. But we did close yesterday at 143 basis points. The Germany to France 10-year yield spread. There's more protests gearing up again, French student protests gearing up there. And we're seeing the budget debate in the National Assembly. So that situation remains something we need to monitor for stability and sovereign debt markets. That certainly helps, at least at the margin, if US Treasury yields are headed lower rather than higher. But we still have to consider its own dynamics in Europe with the signals from the government and on that budget and its credibility, as well as the other pressures on the European economy from these high energy prices. And whether that's its own, which it is, its own independent variable pressurizing the situation. By the way, seeing that there was this, I don't know who this outfit is, is Kepler. They're responsible for a lot of data or they post a lot of data about the shipments coming in and out of the Strait of Hormuz. Somebody's saying, at least I saw an oilprice.com headline talking about, Kepler was saying they believe that maybe there were some under the table agreements from basically other Persian Gulf powers that are doing oil exports, that they may be actually paying Iran to not target their ships. So if that's the case, very interesting on that front. Also, I guess to round out some of the geopolitical news, there was this weird attack on, a cyber attack on French supermarket freezers. So those that had not updated the firmware on their freezers saw their, I guess on one particular brand or whatever, something like $100,000. Something like 150 supermarkets seeing their freezers hacked and set into defrost and even somehow into heating cycles and a considerable amount of food that had to be thrown out because of that. You wonder if this is some form of hybrid warfare, some kind of nuisance from Russian hackers or otherwise, but certainly something to continue to track the noise level on these types of situations. And then I guess I just have a few bits and pieces of just little news items and headlines I jotted down that I think are all. They're all of interest. I'll link one of these to a Wall Street Journal article today. What was the title? China's weakening economy is creating a lost generation. Talking about the pain being felt by China's younger generation that's entering the jobs market. Now, I was just running the numbers because I know that the younger generations are quite small, but there's actually kind of some bulges and contractions in the population pyramid because of the wild swings in, you know, when the fertility boom was happening back in the 60s and then an echo boom back in, I guess, around the 80s. So you have 20 to 29-year-olds in China, according to official data, around 160 million Chinese. That's a lot of people that are either entering or already in the first years of their working lives. But if you contrast that with the 35 to 44, that 10-year cohort, that's 226 million. So this is a considerably smaller generation. And actually, the weird thing is then there's a small bulge of just slightly larger generation below 20 that then absolutely collapses because the one-child policy and then the smaller generation is having fewer kids. So when you're down to the zero to five-year-olds, you're wondering what China's future will hold population-wise. It is such a dramatic contraction. So point being that you have this generation that's quite small that is entering or just in its first years of the labor market, and yet they're still having a hard time of it. Quite interesting there. But to link that to LVMH announcing that they're seeing a double-digit drop, I guess they report semi-annually. So I guess this is like a quarterly report of sales. A quarterly drop in the double-digits category for China sales. So that's been quite a remarkable fall for that company and, of course, is a very key market, China. You wonder if it's really ever coming back. You're seeing this in some of the other consumer companies as well. Maybe tastes are shifting. Focus on what they're going to consume or consuming it locally because I know there's been a welter of new China luxury outfits with their own quality brands and more on the mass consumption front as well with sports brands and otherwise. Then there was this interesting one, just a blurb I saw. J.P. Morgan and Goldman Sachs have taken the rare step, was the wording used, rare step to limit their exposure to a $5 billion loan to an AI startup called Volta Infrastructure. Never heard of it. It's just a startup. We're always tracking listed stuff here. But maybe some signs of caution in the lending space. This is a critical ongoing theme. And to link it to another link for the podcast episode description, there was this 38-part thread on X posted by KKGB about the AI build-out and about the, obviously, concerns that the demand won't be there. For all of this infrastructure. This has got to be an existential concern for the space. And then along those lines, I also saw the Broadcom CEO, and this is really strange, Broadcom CEO Hock Tan out talking about, you wonder, this is a company that has just had a wild success in advance because of the AI build-out. They do the customized chips that are used for inference and otherwise. So Hock Tan is saying that AI investors don't understand what they're investing in. They don't understand what they're buying. He said too many of them anyway. And they're participating in it like casino gamblers. Then he also questions whether businesses are getting value from AI. Slightly big question there. And that the big speed limiter out over the horizon could be access to financing for chip makers to continue to grow. So just getting a negative vibe across the space here when such a prominent CEO comes. So we're seeing hardware down. The usual pattern will be by the time the U.S. rolls in, assuming we don't have another huge pump in crude oil prices, the buying starts and we maybe open down to 300 points and then rally back to unchanged or better. But let's see if there is some kind of breaking point here in this confidence level, which I have found just absolutely stunning of late. The wall of worry just continues to get climbed. But let's see if that can continue. And then the final little news item I saw here was Metastock advancing something like on the order of three and a half percent. As there's been some commentary about the Muse app proving quite sticky. The retention is good after one day. And I was surprised to see that they listed also something like the three or four week retention of chat GBT being on the order of only 23 percent, which was great. That surprises me. Who installs chat GBT? And then almost everybody gets. I found that odd. Maybe that was around the initial introduction of it. People don't know what to use it for and deleted it back when it was brand new. But in any case, Muse is proving sticky. That was boosting Metastock price, though a bit concerned when you see Jim Cramer out saying it's a screaming buy. Sometimes he is jokingly considered a reverse indicator. But yeah, that just about rounds it out. Another couple of links for you on the U.S. car loan space. A colleague of mine sending along. A very interesting article there. I knew there was a lot of stress in car loans, but this quantifies it in a way that shows you how stretched the average or median U.S. consumer is. It's really unbelievable. Some of these cars are being financed, financing a car that's 12, 15 years old, becoming increasingly common. And there's just a sign of the household financial stress in the U.S. Not that that's what's driving the markets these days. But it is an underlying concern. You can also look for a very funny parody. Somebody created of Elon Musk and his Mars colony all dressed up in a 1970s vibe. It's absolutely hilarious. So I'll put that link in there as well. And yeah, and I am enjoying, by the way, I sent this link a couple of episodes back for the podcast. His name, Ahmed, the author of The Great Lords of Finance. He's written this new 1873 book. Super interesting history of all this credit binge that happened both in Europe and the U.S. Remember, the U.S. was a much smaller fry back then than the European financing scene. And a lot of the trigger here was the Franco-Prussian War of 1870. I think it ran into 1871, but it was right around that time point. And there was a lot of financing going on leading up to that. And then France was charged with having to pay an enormous sum to Germany, which suddenly, we saw its money supply just explode on the order of, I can't remember the percentages, maybe it was 25% in one year. This powered a knock-on boom. And then the whole success of the French ability to float a massive bond issuance to pay for this war peace settlement actually, ironically, encouraged a further binge of extension of credit, all resulting in this big 1873 hangover. Super interesting history. You find it at the origins. It's of a more rabid anti-Semitism because of, of course, the hangover from all the lending, the association of many banking outfits and banking houses being led by Jewish families. The Rothschilds were the most prominent of those lenders. And how that, just this whole, I haven't even gotten very far into the book, maybe I'm a quarter of the way through, but a very well-written and very colorful account of what was going on during that, and how this may have set up a lot of subsequent, history and attitude towards many things, especially the gold standard, a very problematic player in this whole episode. Which, you know, and it reached this denouement, the whole gold standard thing after World War I, when, when the powers tried to go back on the gold standard, and that helps create or feed or aggravate the Great Depression. All right. That is it for today. I think super interesting what's going on here. Our treasuries, a safe haven. Is the dollar going to be able to continue if, if rates are backing down and we see dollar yen rolling over? Or have we reached sort of a stopping point there? Have we got the CPI up tomorrow? I'm not sure it matters actually that much unless it's a massive surprise, especially if the geopolitical backdrop remains hot and oil prices are doing, either going up aggressively or receding aggressively. I think that's more important than rates here in the very, or sorry, inflation reports here in the very near term. And yeah. And there's the overall shakiness, apparent shakiness in some of the AI hardware space. That's quite of a sudden onset variety. It feels like there's a lot of potential energy out there, even with the VIX still quite low. So let's see how it all turns out. And above all, stay careful out there and we'll be back tomorrow with the next Saxo Market Call. This has been the Saxo Market Call podcast. Thanks for watching. Thanks for joining today's episode. We're always happy for your feedback and questions of all kinds. To reach out, you can drop us an email at marketcallatsaxobank.com. That's marketcallatsaxobank.com. Saxo. Serious trading worldwide. We'll see you next time on Market Call.
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